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  3. Analyzing Financial Statements in Python

Exercise

Computing multiple ratios with the user-defined function

Let's have a look at the function you saw in the last two exercises.

def compute_ratio(df, numerator, denominator, ratio_name, 
                  addition_in_numerator = True,
                  addition_in_denominator = True):
  ratio_numerator = np.where(addition_in_numerator,
                             df[numerator].sum(axis=1), 
                             df[numerator[0]] - df[numerator[1:]].sum(
                               axis=1))
  ratio_denominator = np.where(addition_in_denominator, 
                               df[denominator].sum(axis=1), 
                               df[denominator[0]] - df[denominator[1:]].sum(axis=1))
  df[ratio_name] = ratio_numerator/ratio_denominator
  return df

Recall that in the previous exercise, we used the function to compute ratios. Still, it was not more efficient nor did it involve less coding to compute the ratios using this function. In this exercise, you'll see how the function can be used to compute many ratios in a loop. This will make computing multiple ratios more efficient and involve less coding.

Instructions 1/3

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  • Let's start off by checking the columns in the DataFrame merged_dat.